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09/03/2006

Extending Life--Posner

A recent article in the New England Journal of Medicine by an economist (David Cutler) and two M.D.‚Äôs (Allison Brown and Sandeep Vijan), summarized last week in articles in the New York Times and the Wall Street Journal, presents estimates of the contribution of medical spending to longevity. U.S. life expectancy at birth has increased by about 7 years (from 70 to 77) since 1960, and the authors, estimating that half this increase is due to medical spending rather than to life-style changes (such as reduced cigarette smoking and safer cars and working conditions), divide aggregate medical spending by the increase in longevity to generate an estimate of the cost of extending life by one year. The authors recognize that much medical spending does not increase life expectancy but does create utility by curing or alleviating medical conditions that do not cause death (blindness and deafness are examples). This implies that their estimates substantially understate the benefits of the spending.
The authors find that inflation-adjusted medical spending since 1960 has on average extended life at a cost of slightly under $20,000 for each year of added life, but that the cost has been growing and is now almost double that, and that when it comes to extending the life of elderly people (65 and up), the current cost per year is $145,000. This range is plausible because 90 percent of the increase in life expectancy, the authors find, has resulted from reduced infant mortality (due largely to better medical treatment for the health problems of premature babies) and reduced death from heart disease, and the treatments for these conditions tend not to be very expensive‚Äîmuch treatment of heart disease consists of prophylactic drug therapy to reduce blood pressure and cholesterol. Keeping old people alive is much more challenging, involving as it does frequent hospitalizations and treatments with increasingly expensive but not very effective cancer drugs. (The authors find that cancer treatment is responsible for only 3 percent of the increased life expectancy since 1960.)
When one considers the value that people attach to their lives (the current average estimate of the value of life of Americans, inferred from their behavior toward risk, is $7 million, though this figure has little significance in the case of elderly and dying patients, who are in fact the principal consumers of health care), the costs incurred in extending the life expectancy of infants and children, young adults, and middle-aged people seem modest, especially when one remembers that medical spending enhances utility in many ways besides just adding years to life. But even without regard to the special problem of medical spending on the elderly, there is a marked discrepancy between marginal costs and marginal benefits. The discrepancy occurs at two levels. Most of the increase in life expectancy that is attributable to medical care is, as I have already hinted at, probably due to relatively inexpensive and rather routine medical interventions, including better prenatal and natal care, blood pressure and cholesterol drugs, angiograms and angioplasty, and coronary bypass surgery (the last is hardly inexpensive, but it no longer requires a prolonged hospital stay, so it is not comparable in cost to treating a chronic disease, such as renal failure). Suppose that 90 percent of the increased longevity due to medical spending is attributable to the first $5,000 spent per year; then aggregate medical spending could be grossly in excess of any reasonable estimate of incremental benefits. The last $15,000 might be purchasing longevity increases measured in days rather than years. An example is dialysis treatment, which is very costly, for dying patients.
This phenomenon is likely to be most pronounced in the case of the elderly. I can speak from my own experience. My father died a few days short of his 96th birthday. He had been in pretty good shape until about six months before his death, and until his terminal decline his lifetime medical expenditures had been quite modest. In the last six months of his life, however, he incurred total medical bills of about $300,000, virtually all paid for by a combination of Medicare and private Medigap (also known as "Medicare Supplementa") insurance. The maximum extension of his life that this expenditure could have bought was six months, but that is plainly an overestimate, since his deterioration was gradual. The quality of his life during this period was poor, though it would have been even poorer without medical treatment. Because people fear death and his treatment was virtually costless to him, he did not choose to forgo any of the treatments offered him. That was a perfectly rational choice, but the economic implications are disturbing. With Medicare supplemented by private insurance, we attain an almost complete divorce between benefit and cost: the patient (and his family) receives all the benefit, and the taxpayer (and the members of private insurance pools) pays all the cost. The incentives for economizing are very weak. The problem is growing as the number of elderly Americans increases along with the cost of advanced medical treatments.
The only solution to the problem that I can think of, brutal as it sounds, is to reduce Medicare benefits. If the slack is taken up by increased private spending, well and good; that would just show that the elderly and their families really do place a very high value on trivial extensions of a not very pleasant life. But the slack will not be taken up fully by private spending, because most people have limited financial means. Although hospitals will not refuse emergency treatment to people who cannot pay for it, they will not provide the most advanced treatments to such people. So cutting public benefits would result in a real reduction in medical spending on the elderly. There would be a loss of utility but in my judgment it would be more than offset by the savings to the taxpayer. If my father's case is typical, expensive efforts to extend the life of elderly people by a few months do not generate proportionate benefits.

Comments

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Excuse me, Mr. Posner, for publicly asking a private question: In case that your father's disease expenses wouldn't have been covered by a third party, would have you paid for them?
$ 300.000 is still far below the $7 million you quote about perceived personal's life value. In fact, given that $7 million is a figure that most people won't ever have, it seems that people believe that their lives are of a value beyond their economical means.
In my opinion, reducing coverage would of course reduce expenses, but not because of people not willing to pay, but because of people not being able to pay. Then, the decision involves ethical analysis beyond the economic one.

One more thing, children and spouses of the elderly may care very much about the lives of their parent and spouses. Many childern and spouses (but not all) will be willing to spend all of their resources and to exhaust their borrowing power to purchase either a short-time extension of life or the hope (read low-probability expectation) of a miracle recovery. These expeditures have far different social consequences that do similar expenditures by the elderly themselves--and in the case of children may have ramifying effects on the grandchildren and great-grandchildren of the dying elderly patient. Without generous end-of-life social insurance, the children of the elderly will inevitably be forced to make very difficult choices about their own financial well-being and that of their own own children and grandchildren.

Might it make sense to allow people on Medicaid to "buy down" their future benefits? Suppose someone age 70 and in fairly good health could opt to receive a one-time cash payment or a small month payment from Medicaid in exchange for accepting a lifetime cap on medical payments. In that instance, retirees would actually pay a price for utilizing their currently costless benefits.

(1) People complain about the rising real cost of medical care, however, the advances in the quality and effectiveness of that care (which generate the extra cost) are generally in line with the greater benefits received.

(2) Nevertheless, there are wildly different marginal benefits conferred from a dollar of medical spending depending upon whom the dollar is spent. This has uncomfortable implications for the allocation of public health expenditures, but the difficult discussion of how to make these challenging choices should begin soon because otherwsie trends in costs and demographics will quickly push us to the wall with less freedom to maneuver.

While the estimates in "increase in life expectancy" are rough approximations (and seem to me a clumsy measure of benefit from medical care), it's probably as good as any objective metric we could choose to use.

If one has a limited budget to spend on a group of people, and it's insufficient to pay for all the advanced medical care that every person in that group wants - then some decisions have to be made about what desired care must be excluded.

There are many ways to make the decision. We could exclude people from our group on both sides - those who could and would pay for the care on their own, and those we would force into an uninsured population. We could choose politically, and let popular diseases among groups with clout trap the bulk of our budget. Or we could choose rationally and economically, by choosing some objective way to measure utility and by excluding those services that confer the least marginal benefit.

The advantage to such a method of decision making, of course, is that it highlights the opportunity costs of every decision. If extending the life of a centenarian by a few months costs as much as providing vaccines and primary care for 100 children who would otherwise go uninsured, then a choice in priority must be made. No one wants to tell their great-grandfather that the public budget can't afford his treatments, but it's easier to swallow if one is made to confront the equally undesirable pain of the lost alternative.

In my opinion, we are, as a society, completely unprepared to have this discussion in a civil manner, and that's very much too bad. Health is such an emotionally, religiously, and politically charged topic that any progress will be forstalled for some time. In the mean time, though, we should recognize that by doing nothing we are still making a choice to accept the current system and its deficiencies. I hope that choice is not so bad as choosing to remain parked on the railroad tracks.

First of all, I think cutting people off of government assisted healthcare would cause more problems than it would solve because it would force people to resort to desperate measures to save the lives of their loved ones.

About ten years ago, my brother was an exchange student in Venezuela and his host mother was from Columbia. There he witnessed the poverty that fomented the Chavez regime. He came back with countless stories of ruthless "third world crime" that is completely different from the crime we experience here in America. It stemmed, in part, from smart, hard-working, decent people being put in a position where financial security is necessary for survival. Luckily, here in America no one is in that position (even those without health insurance).

I have two suggestions for how to mitigate this health care cost problem. One is to raise the retirement age to a point were people are actually unable to work (rather than the current "unable to work, yet able to play golf all day").

The other is to have the government (or some other neutral party) devote some serious time and energy to find ways to bring down the cost of health care. A few years ago, I read an article in the Harvard Business Review by Professor Michael E. Porter where he highlighted alot of the problems caused by a lack of a proper competive structure in the health care industry and made alot of good points (unfortunatly, I can't find the article or remember his points well enough to describe them in a proper way). He recently came out with a new book on this topic, which I'm sure is worth reading for anyone interested in this topic.

Echoing the above sentiments, it's a shame that we could never have a rational public discussion about this topic anywhere but on this blog. Sadder still is that even if we could, our government could never accomplish any of the steps recommended here: for one, the elderly are a demographic with money and votes [in swing-state Florida, no less] and our government won't do anything to upset them for several more decades. Even if their objections could be overcome, I can't imagine our government implementing a long-range plan that would be necessary for something like this. Any fix for the current system must recognize that people who have lived their lives with the expectation of Medicare assistance have not saved the resources they would need if Medicare became unavailable. Thus, benefits to the elderly would have to be phased out, with ever shrinking benefits to those who are in ther 50s, 40s, 30s, and 20s today, until those who are currently minors and thus will go through their working lives knowing they can't rely on Medicare get no benefits at all [or whatever scheme we choose for the elderly]. It's unlikely our government, which has chosen to insure those above 65 rather than those under 18, could ever get this done. But it gives us cynics something to talk about.

Interesting issue raised by Judge Posner, but I don't think that "cut Medicare" is a well-tailored solution. I, personally, think that proposal reflects an ideological bias against government sponsored health care rather than a true engagement of the question of end of life care.

Perhaps we should invite doctors to discuss the issue of heroic measures, prolonged hospitalization, etc. at the end of a person's natural life. Certain types of treatment might not be either compassionate or economically "rational." But, I would think, each particular patient has individual circumstances that weigh into to answer. Perhaps the problem is that we have not yet resolved, as a society, what it means to give compassionate care to patients at the end of their natural lives.

You've presented an important policy problem and complemented it with an excellent discussion. However I am skeptical of your conclusion that our society is spending too much on the last few days of life.

You have convinced me that the "marginal benefits" of the last several days in a person's life are staggeringly high. These people rarely contribute to their communities or, sadly, many are so incapacitated that they are of little utility to themselves or their loved ones.

However I believe such efforts are a small cost when weighed against the indiginity of denying people those treatments. Part of marginal analysis is acknowledging alternatives. Perhaps they contribute little, but isn't human dignity also worth something? This is also a rational social choice.

I do agree with your recommendation that Medicare spending should be reduced on the aggregate. However reducing total spending may leave many programs of high utility without funding and those of low utility would remain. In the future, more specific and somewhat itemized recommendations would assist your conclusion.

Increasingly complex and expensive treatments will continue to be offered at taxpayer expense to a rapidly growing segment of the population, for whom there is no rational reason to decline. Costs are very high today and will rise. In 2006, Medicaid spending will be around $440 billion, many times the cost of the War on Terrorism.

Money for the program is provided by taxes on wage earners and businesses. Costs have risen at an average 9% annual growth rate since 1970.

If the United States wants to remain competitive in the global marketplace, the status quo is not sustainable. The Professor‚Äôs concept of limiting exorbitant end-of-life expenses with limited benefit makes sense to me

The status quo isn't sustainable, but the status quo shouldn't have to be sustained. Current medical spending patterns are a result of our transitional status: We're starting to understand enough about biology to get treatments that actually benefit people, (Saying, "He's dead, Jim!" is remarkably cheap.) but we're not quite to the point of keeping people healthy in the first place.

That's the next step, when we start to understand the origins of these conditions, and by intervening before they develop, keep people healthy and productive. Including intervening in the ultimate cause of medical expenses: Aging. THAT is where the real savings will show up, and it should start happening within a decade or so.

There is a matter of subtlety which seems not to have been addressed, although I doubt that it significantly alters the underlying economics of Mr. Posner's argument.
It is not unequivocally the case that medical treatments provided to those over 65 (or for that matter, any other benchmark age) serve only to improve and possibly extend quality of life for a matter of months. Medicine is a science, but an uncertain one. Some treatments may offer the possibility, but not a guarantee, of extending life for years, even a decade or more. Are these more, less, or equally worth the cost compared to treatments which merely relieve short term suffering without the same level of either hope or risk? If Mr. Posner, Sr. had spent the same $300,000 on a treatment which had a 50% chance of extending his life another five years but which failed, would his son have considered it equally wasteful?

Quick correction: As a friend of hers, I'd like to point out that one of the authors' names is Allison Rosen, not Allison Brown. In addition, Dr. Rosen earned a Doctor of Science in Health Policy and Management, by which she gained solid training in health economics. To label her as just an M.D. is to slight her. She deserves respect as someone capable of accomplishing the interesting analysis and who has a thorough understanding of the ideas communicated in their paper and their ramifications.

I think we should carefully study how our sister countries in Western Europe, Canada, UK, Japan and Australia deal with healthcare spending at the end of life and see what, if anything, we can learn from them. In the UK, the National Institute for Clinical Experience (NICE) decides what treatments to cover or not cover, at least in part, based on how much they cost per quality adjusted life year or QALY. The current threshhold, I believe, is $50,000 GBP per QALY or about $95,000 at current exchange rates. This approach has the added benefit of taking decision making out of the family's hands. They could we did everything we could for mom or dad WITHIN THE SYSTEM.

We could also make an aggressive effort to significantly increase the percentage of the elderly who have executed a living will or advance directive for healthcare to clearly communicate in advance what treatments they want and don't want as the end of life approaches. Perhaps it could even be made part of the process of signing up for Medicare or Medicaid or entering a skilled nursing or assisted living facility.

We as a society have to face the fact that resources are finite and we cannot provide everything to everybody at taxpayer expense forever. More and more people with terminal conditions are, in fact, choosing hospice care or palliation.

Finally, I have read (can't remember where) that many of the elderly do not fear death. It is their middle age children who have not yet come to grips with their own mortality who fear death.

"In my opinion, reducing coverage would of course reduce expenses, but not because of people not willing to pay, but because of people not being able to pay. Then, the decision involves ethical analysis beyond the economic one."

This is a good point. If Posner's solution only allowed the rich to choose a greater inheritance for their children over a few months of life, there would be little to object to. But, in reality, reducing medicare benefits will create the worst sort of inequality--the rich will still have the choice and in many cases will still exercise that choice, while the poor will not. In most other circumstances inequality is healthy and unavoidable, but there is something different, profoundly different in my view, about how the market works when it comes to life and death. Either we let the market work and ration by price and ability to pay, as Posner suggests, or we let the government prioritize and ration treatment according to cost-benefit analysis. Or we stay with the current mess. I don't like the options.

Melissa Halle's (and Frank's) point is also excellent. Individuals often choose treatments which MAY result in greatly increasing their lifespan but which ordinarily only add a few months. Is that a choice for a few months of life or a choice for the chance at many years? Framing it as a choice for a few additional uncomfortable months of life rather than a small chance at surviving many years puts Posner's point in the best possible light--choosing death seems more rational, more acceptable when the exception or the small chance is excluded.

It is basic human nature that most people will spend other people's money more quickly and less wisely than their own. Since resources are finite, taxes are already high, and we have about 46 million people in this country without health insurance, some form of systematic rationing of healthcare based on cost-benefit analysis is appropriate, in my view. At the same time, I don't think it is advisable or even possible to stop wealthy people from spending their own money. As long as doing so does not crowd out the opportunity to provide more cost-effective care to non-wealthy people, I would have no objection. In the case of experimental treatments with low or unknown probability of success, there would even be some research value in the form of real world experience than science and the rest of society might benefit from in the future.

The problem with these rational analyses is that they dont understand how health care works. THe decisions about end of life care are NOT made by patients--they are made by doctors and health care organizations.

Wennberg's work CLEARLY shows that. The enormous practice variation in end of life care is a factor of cultural variation amongst physicians NOT one of patient choice. And it applies whatever the insurance status of the individual.

Other countries have got their physicians somehow to accept that (for instance) heart surgery or kidney dialysis on a 95 year old with a life expectancy of 6 months is NOT GOOD MEDICAL PRACTICE. Here we routinely do it (as in Posner's father's case).

Stopping that absurdity is the solution to our health care crisis as that's where the vast majority of the unneccessary spending is. But to do that we have to change medical culture, and rather more difficultly, health care system incomes!

What to do? What to do, when the demand for medical services outstrips supply? Apply the principles of "triage". Hard hearted? Yes. Hard headed? Yes. But, at least it maximizes the number of survivors. A good in anyone's book I guess. Perhaps a modified form ought to be applied to the application of medical care throughout life. It might very well solve a large number of problems.

As someone once said, "It's not so much that I'm afraid to die, it's more the fear of a lingering death." Perhaps it's more kind, humane, pragmatic and utilitarian to deny medical services in some cases than supply it to lost causes. We do shoot horses don't we. It may also well be, that we treat them better than we do ourselves.

A very interesting post. In other news today, I noticed that the FDA has just given limited approval to Abiomed for their use of artificial hearts, which at the current time are still an expensive way to exend life for only a short period--the kind of spending Judge Posner questions. The idea, however, seems to be that in the future the reliability of these devices and the related treatment/surgery will improve, the costs will decline, and that the artificial heart will someday be the equal of a heart transplant from a living donor, or at least much more widespread than a few uses a year.
I wonder if other medical therapies have taken or are likely to follow this path--from expensive treatments for the elderly to more common treatments for the middle-aged--and if the practice of expensive treatement to delay the end of life a little while is also the best way of improving new and possibly dangerous drugs?
I'm not suggesting that the current system doesn't overspend on the end of life--it surely does--but a system designed to bring the marginal private cost of care in line with the marginal private benefits might underspend on these treatments, whose promise lies not only in the patient being treated but in further improvement of the drug.

Agreed: The high cost of end-of-life care is inefficient relative to its marginal utility.

Uncontroversial moral assertion: End of life care is something that should not be rationed based on ability to pay or economic utility.

And yet, predictably, Posner's and many commentators solution is to reduce medicare benefits, shifting more of the burden of paying for such care onto private funds. The end result of this is inevitably rationing based on inability to pay.

Try starting from this point: "Why is the cost of medical care so high?" End-of-life medical care is NOT, I repeat NOT priced in an open, free market. It is priced in an environment of government guarantees and "help me I might die tomorrow" incentives on consumers.

Elderly patients don't care about the price because 1) the government pays, and 2) it is a matter of life and death. Posner wants to remove reason 1) and let people forego care. But of course because of 2) they won't forego treatment unless they are broke. The poor die younger and harder.

That is not a good solution. Instead, we should look at end-of-life care as a command-economy pricing exercise. That is, guaranteed care, at guaranteed prices. Posner wants free market pricing with significantly lesser guarantees on care, which is tolerable only if you ignore the disparate class effects.

The system we have now is halfway in between, guaranteed care, with virtually no restraints on pricing - neither market based or regulatory. I say, since the public clearly wants guaranteed care, the only effective way to provide that going forward is with price controls.

And then we can have a debate on how to set pricing such that the industry makes enough profit to properly incent new technology. I think I can make a clear case that there are too many incentives now, comparing R&D expenditures with profit/dividend costs.

You all will jump on me and say "let the market set the price" but again, this is NOT and will never be an open market. Even if you eliminate the distortion caused by guaranteed service, you can't eliminate the demand distortion caused by the desire to not die.

So don't decrease medicare benefits, decrease what the government pays for them. The government is capable of setting prices and does so all the time re: defense contractors. We still have the best war stuff in the world under a single payer war model. The obstacles to effective single payer administration of health care are political not instrumental. And much if not all of the problem lies in stubborn insistence on conceptionalizing health care as a free market - unlike every other successful health system worldwide.

Side point:

"Echoing the above sentiments, it's a shame that we could never have a rational public discussion about this topic anywhere but on this blog."

What basis do you have for that sort of cynicism. What feature of this blog do you think insulates it from irrationality? The fact that there is little diversity of viewpoint or background here?

Interesting how the use of the word "cost," as in "rising health care costs" and "the cost of treatment X" leads people to treat the cost as inevitable or necessary to the continued superiority of our system.

Try rereading some of the posts here but substitute "price," as in "rising health care prices" and "the price of treatment X." Doesn't seem so inevitable does it, in fact, it kind of makes you mad at the companies who are jacking up the price on children and old people. You wonder how many sailboats their CEOs have...

Excellent commentary.
I'll simply state the obvious and sad truth, which is that if the adult population of the U.S. stopped smoking, drinking to excess, eating to excess, and being so sedentary, the entire medical-industrial complex we've created for ourselves would likely collapse for want of diseased patients.

Additionally, for those patients with serious diseases such as diabetes and heart disease, intelligently organized payment/reimbursement for preventative care is a money-saving (not to mention life-year-saving) approach that deserves far more consideration than it currently gets.

DJS: no, all those people would still die. If you lessen heart disease, and system failures from diabetes and obesity, you may reduce the aggregate expenditures somewhat, but more likely you'll just redistribute the pie. You'll end up increasing, for example, cancer deaths, and cancer treatment is already big business.

"What basis do you have for that sort of cynicism. What feature of this blog do you think insulates it from irrationality? The fact that there is little diversity of viewpoint or background here?"

The lack of diversity helps, although you're totally ruining it. Anyway, if you think this issue would work well in a public debate, give it a shot. Let me know long it takes for someone to accuse you of wanting to kill their grandma. My guess is, about as long as any abortion debate goes without the word "babykiller."

Your proposed single payer system would run into the same problems as every other single payer system: massive delays, cost overruns, and general inefficiency - inefficiency that would increase suffering in this case. Our defense programs have the same issues - I think a couple of years ago we finally canceled the order for a new helicopter system...that we ordered in the early 1980's. If that's a price we are willing to pay, we are better off leaving things as they are.
Also, "the desire to not die" is not a market distortion. I think it's a legitimate preference, and if someone wants to spend all of one's wealth on end of life care, I am perfectly fine with that. But I'm also okay with having to spend the next 60 years saving up for that time, and then spending my own money. [Hence the need for a graduated reduction of benefits, should it ever happen - people near the end of their lives did not know they should have been saving up for this.] In a system that is closer to a pure market, those who want to ensure that their fellow man is taken care of near the end of life can do so through private charities. But we wouldn't be devoting resources to the elderly when the more effecient, and I would argue more moral course would be to use those resources for the good of children.